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Tax Related News by Eggett Tax Services

NEW TAX CREDITS FOR 2014 – WHAT DO THEY MEAN FOR YOU?*

2014 was a landmark year for enhanced family and child related tax benefits. We are committed to helping you get the most from these government announced initiatives. Here’s what’s proposed:

UNIVERSAL CHILD CARE BENEFIT

  • As of January 1st, 2015 the UCCB would increase to $1,920 per year for each child under the age of 6 ($160/mth from $100/mth)
  • The UCCB would also expand with a new benefit of $720 per year for each child aged 7-17 ($60/mth from $0/mth)
  • CRA will issue a ‘catch-up payment’ for amounts payable from January through June in July 2015. This means:
    • for children under 6, you could receive $60/mth from January to June, for a total of $520 in July, and $160/mth starting in August
    • for children between 6-17, you could receive a total of $420 in July and $60/mth starting in August
  • This credit is available to all families, regardless of income, and is in addition to the Child Tax Benefit (CTB) program

FAMILY TAX CUT

  • This new tax credit (often referred to as income splitting) is worth up to $2,000 in tax savings for families with children under age 18
  • It allows one spouse to transfer up to $50,000 of taxable income, in effect to a spouse in a lower income tax bracket
  • Both spouses must complete their returns at the same time to be eligible for the calculation of total income and the family tax credit
  • This credit won’t provide any relief for single parent families

CHILD FITNESS TAX CREDIT

  • The maximum eligible amount has doubled to $1,000
  • Effective for 2015, becomes a refundable credit
  • Can be claimed for children under 16 at the beginning of the year, or under age 18 for children with a disability

CHILD CARE EXPENSES

  • Increases apply for child care expenses in 2015 and forward:
    • Up to $8,000 per year per child under age 7
    • Up to $5,000 per year per child aged 7 to16
    • Up to $11,000 per year for children with a disability

SEARCH & RESCUE VOLUNTEERS TAX CREDIT

  • This is a new non-refundable tax credit of $3,000 for volunteers who perform 200 hours or more of eligible services with search & rescue organizations or fire departments
  • Hours of service since Jan 1st, 2014 qualify for the credit; a written certificate of hours if required to claim the credit
  • If eligible, you may claim either the volunteer firefighter credit or this credit, but not both

ONTARIO FOOD PROGRAM DONATION TAX CREDIT

  • This is a new Ontario non-refundable tax credit for agriculture products grown and donated to an eligible community food programme as of January 1st, 2014
  • Available to farmers, their spouses and to corporations who carry on a business of farming in Ontario, the credit is worth 25% of the Fair Market Value (FMV) of the product donated

 

GST / HST CREDIT

  • Effective with the 2014 tax return, CRA will automatically determine eligibility for this credit and a Notice of Determination will be sent to individuals who qualify – making the application is no longer required
  • Designation of the recipient for the GST will be determined by CRA where either spouse/partner is eligible for the credit. A specific recipient can no longer be requested

 

*New Tax Credits proposed were announced in the 2014 federal budget, but will not become law until they have received Royal Assent through parliament. We will communicate updates and changes through our website as available. Check back often for what’s new!

Tax News

Announced October 9th (but not yet passed into law) both the fitness credit and the art credit for 2014 will be $1000 each. Be sure to keep receipts.

The government has initiated some movement on the election promise of employment income splitting for families. A somewhat disappointing limit of $2000 per year was mentioned. This may be the first step toward an incremental change over a longer period of time and as such can be very exciting news!

YEAR END TAX TIPS:

Canada Disability Tax Grant: The government will provide a grant of up to 300% on contributions made towards a disabled beneficiary. Contributions can be made until the calendar year in which the beneficiary turns 49 years old. The grant is made on any contributions made by December 31, 2014.

RRSP withdrawals: If you have had an unusually lower income in 2014 it may be beneficial for you to withdraw some of your RRSP’s before December 31.

Tax Loss Selling: If you have had taxable capital gains in the preceding three years it may be advantages to sell `losing` stock before December 24th 2014. The losses can be carried back to claim a refund against capital gains over the previous three years (to 2011). You may re-purchase the losing stock back but allow a period of 30 days between transactions.

Small Business Owners: Consider paying your children or spouse a reasonable amount for work performed in your business. Activities may include cleaning, website development, answering the phone and making appointments, managing emails, filing, sorting, data input etc. Keep track of the hours work and payments made. A yearend bonus can be made for services provided in 2014.

CASH … a risky tax plan!

Generally accepted practices for all cash transactions demands that the payee should always receive a receipt at the time of accepting a cash payment. Many businesses will give a small discount for cash payments as certain transaction fees are avoided.

If you are ever offered a reduced price for cash without a receipt think twice! Usually this means that the person asking for an “unreceipted” cash transaction will not be reporting the sale as income to Canada Revenue Agency.

This behaviour promotes the impression that the sales person or worker is less than honest. This should naturally reduce your confidence in both the person and the service being provided. Cash transactions may reduce your immediate costs but even greater expenses may be incurred by your acceptance. The reduction of the HST you would have paid and the taxes not paid by the business will inevitably increase your personal tax burden when you consider the thousands of people who are members of this underground economy.

Consumers who are avoiding the immediate tax owing can later find out that as there is no proof of the transaction the product or service you have paid for has no warranty. You may have no recourse in case of poor workmanship. As the work may be sub-standard you may also incur a further risk of liability in case of injury on your property.

Business owners who contract products or services for cash, and there is no receipt, cannot deduct the expense. CRA demands that you provide documentation for all expenses deducted on your business statement.

All transactions involving cash should be immediately receipted. This is equally as important when paying for rent, child care services, auto and house repairs.